2022 was a challenging year for the Australian construction industry. However, the industry showed resilience and growth although faced with serious supply chain and labour shortage issues. Let’s explore the main trends and present the detailed Australian construction industry outlook for 2022.
The construction industry is a significant part of the Australian economy, producing $360 billion in yearly revenue and 9% of the Gross domestic product. It’s estimated that the construction industry employs more than 1.1 million people nationwide. Most businesses in this industry are either sole traders or small companies that employ less than 20 people.
The construction industry is also one of the pillars to help kick-start the economy after the devastating economic and health consequences of Covid-19.
According to the Australian Construction Industry Forum, the Australian building and construction industry showed resilience and quick recovery in 2021 after being significantly hit by restrictions caused by the pandemic. The construction industry did better than expected in dealing with the new pandemic reality and disruptions that came with that. In 2022, Australian construction industry continued to ramp up with numerous housing and other infrastructure projects.
Additionally, employment levels in the industry increase on a steady basis year by year, and the number of employed people is projected to grow to more than 1,260,000 by 2025.
It’s estimated that the rising number of requests for residential projects makes it very challenging for builders and developers to deliver projects on time. The material and labour costs are surging, and with the disruptions in global supply chains, it is difficult to complete projects on time.
On the other side, non-residential building activity has fallen in 2021 and 2022 with the expectations of further decline. The main causes of such decline are changes in consumer behaviour during the pandemic, increase in interest rates and the lack of government stimulus measures.
In 2022, we saw lower demand for retail spaces and offices, as people work from home more than before the pandemic hit.
After several years of stagnation, we are witnessing the expansion of engineering construction projects in renewable energy. Also, as the restrictions ease, Australian government decided to spend big on infrastructure projects.
Residential construction costs continue to rise at a record level. Estimates show that the rise of construction costs recorded in the last 12 months is 11%. We expect to see further rise in cost, especially for timber, plasterboard, fibre cement and metal materials, and great volatility in prices. Moreover, the cost of labour, raw materials and fuel is also surging, which makes it difficult to predict the total project costs.
Although the Australian construction industry showed some outstanding resilience in these uncertain times, there are still severe issues that impact the project delays and total cost of residential and commercial building projects in Australia. The main industry issues in 2022 were:
Lockdowns around the world have stalled the production and transportation of crucial construction materials. It caused global supply chain issues that have heavily impacted the availability of critical building material like timber, bricks, cement, electrical components, roofing, and steel. The limited supply of raw material is not enough to meet the rising demand for residential and infrastructure projects.
While the demand for these materials is growing, the shortage is expected to last a bit longer, and it will continue to negatively impact the material cost and project deadlines. Therefore, construction projects risks will also rise.
Pressure, volatility, and surging pricing increase of crucial construction materials is something that defined the construction industry in 2022. Factors that influenced the pricing in 2021 are still prevalent, so we expect this trend to continue in 2023.
Surge in tender pricing have been detected in all Australian states. Suppliers aren’t able to hold pricing and guarantee availability at defined supply rates on tenders for key materials, which makes room for even more pricing volatility in construction projects.
Since the pandemic started, construction industry was facing with the shortages of labour. Social distance and travel restrictions negatively impacted the construction labour force in Australia during the pandemic. Since the construction workers are essential workers, they were still called to onsite work during the pandemic in spite of uncertainty. However, due to the current issues in the construction industry, the workforce is under pressure to deliver projects despite the supply chain issues and material shortages. Many skilful and experienced individuals decided to start their careers elsewhere.
Climate crisis is still prevalent, and construction businesses need to contribute to creating innovative solutions to reduce carbon emissions. Construction businesses will need to embrace sustainable designs, so they could help in reducing the impact of global warming. Greener equipment and design solutions and projects will be prioritised.
All challenges come together with new opportunities. Here are some opportunities for further growth in the industry that we have detected:
2023 will be a good year to look for employment in the construction industry. Even though the construction industry is a competitive one, employers value skilful and professional staff, and many Australian construction companies are willing to pay higher wages to retain construction professionals.
Now since the borders are open again, and there are some massive construction projects planned by the Australian government, it will likely attract contractors from different countries.
Another exciting opportunity would be using the latest technology to increase efficiency and effectiveness of construction operations. That will enable better management of human resources, equipment, materials, time, and it would help streamline all project operations and provide quicker access to resources.
In 2019, the Australian government released the National Waste Policy Action Plan where construction companies will adhere to the principles of avoiding and reducing the production of waste, and find new opportunities for recycling and sustainable building.
Since climate change is still a great concern, the goal is to incorporate the principles of sustainability and green design whenever possible. Particularly, the sustainability principles in the construction industry will include:
The construction industry will play a huge role in following these green practices and using the recycled materials to create new buildings and products. Since the Australian construction industry is a huge producer of waste, therefore a multi-faceted approach to this issue is required. Not only construction companies are required to produce more waste, but they are also encouraged to increase the use of recycling by-products and create new opportunities for recycling.